Majestic: optimistic about the future of retail

BySonya Hook

| 23 November, 2018

Majestic Wine is confident that while other retailers are cutting costs, its strategy of continued investments into the business – which the company said was the primary reason for yesterday’s reports of a pre-tax loss of £0.2 million - will strengthen its position for the next phase of UK retail.

Joshua Lincoln, Majestic Wine’s retail and managing director, told DRN: “I am excited and optimistic about the future of retail; it is only going to get better for the consumer because for any retailer to be successful they have to offer an experience you can’t get online, to draw people back to the high street, and so it means the shopping experience will get better.

“When it comes to wine, you still can’t taste wine online and this has always been a big differentiation for Majestic Retail and the service is getting better and better. And I think for the future we are going to keep investing in our people; it is working and it is what we want to be.”

The company posted a pre-tax loss of £0.2million for the first half of its financial year yesterday, but over this period revenue grew 5.4% to £229million, aided by double digit growth through Naked Wines. Lincoln said the drop in profits was primarily the result of a continued focus on investing back into the business.

“Six months ago we said we would drive profits down by investing and this is at a time when a lot of retailers are cutting costs, but we are investing as we think it is going to change and we want to be in a strong position when it does change, so when we look at the recent results – 80% of that is very deliberate.

“The majority of investments have been in Naked Wines but we have also made some strategic changes in Majestic Retail. Our Wine Concierge service launched 12 months ago and we now have 30,000 customers and we are looking at 40,000 by the end of the year. It is all about personalisation – there are no other services of this kind where you can taste the wine first, and the store teams can swap out any wines if needed to make it really personal. We want to make it even more personalised going forwards.

“And then through Naked Wines there has been growth through partnerships, such as with Hello Fresh, and this is a proven model that we are now trialling with Majestic Retail with partnerships such as Barclays, National Trust and sponsoring English Rugby. They are really exciting partnerships and this method has been proven to add more customers, so we will see when we look at this around six to 12 months down the line, and we can examine what the quality of those new customers are. It’s new for Majestic but Naked has been doing this for about 12 years.

“We are also investing around our people, and we launched our Franchise-Lite scheme one year ago, which is doing really well. We now have about a quarter of the estate as partners and they get more autonomy and ownership, and they can look at it as their own business. They get more investment and they get a bigger piece of the growth of the store. We have taken this to another level and we now have super partners, which are partners we can put into a struggling store. They have been able to turn numbers around insanely quickly and we are seeing amazing like-for-like sales with these, plus they can then train the managers up and we can move them on.

“We want more of the estate converted to this scheme and our ambition is that every single site will be run by a partner but they have to earn that. You can really see they grow the profit line incredibly well.”

Lincoln added that the company will be revealing its next three-year plan in June 2019.

“We will give more details then but basically we want our customers to have a seamless journey across any channel they want to work through.”

Lincoln also confirmed the company would be focusing on adding more own-label products to its stores, with a particular focus on the existing Definition and Majestic Loves ranges, which have wines that appeal to the company’s more established and traditional customers as well as newer customers who often favour craft and niche products.

“These ranges are doing really well. We have a Devil’s Creek Sauvignon Blanc, which is one of our own-label wines, and it is one of our biggest selling Sauvignon Blancs at the moment, which is really impressive.”

There will also be more focus on stocking local beers, he explained.

“We gave our store managers the freedom to source and stock local craft spirits, alongside other brands, and both customers and store managers really love this. I would like us to do more along these lines with beer in the future.”

Lincoln also confirmed the news that the company would be stockpiling wine in advance of Brexit - with £5 to 8million added to the inventory, above normal levels – as reported in Majestic’s statement yesterday, but he explained “we have been stockpiling wine for 25 years, and we have added a small percentage in advance of Brexit in March 2019. We have no crystal ball and so if there is any turbulence at that time then we will have a small buffer.”